Friday 11 March 2011

The Fall and Rise of IBM - Company Operations

IT'S HARD TO OVERSTATE HOW DIRE THE SITUATION was at IBM when Lou Gerstner took over in 1993. In the course of just a few years, the company had been reduced from widely feared master of the computer universe to poignant symbol of corporate hubris and American industrial decline. Wave after wave of layoffs -- tens of thousands of people at a time -- had swept through the company. Losses were tallied in the billions. Humiliated by Microsoft and seemingly unable to cope with accelerating technological change, IBM seemed headed for a breakup, or worse.
Gerstner was hardly an obvious savior. Without experience in the computer industry, he immediately confirmed skeptics' worst fears by declaring "the last thing IBM needs right now is a vision." He not only rejected the breakup option, but he reversed the decentralization efforts of his disgraced predecessor, John Akers. If he had a grand plan, few could see it.
Today, as Gerstner prepares to depart, the turnaround he engineered looks nothing short of miraculous. [See story, page 56.] While it no longer dominates the computer world, IBM is showing steady growth and solid profits even as the rest of the industry reels from a sharp downturn in demand. In cutting-edge technology, in software, in services, and yes, in old-fashioned computer hardware, IBM is once again a force to be reckoned with.
It's tempting, in light of this history, to give all the credit to Gerstner, and we'd be the last to deny him his due. Indeed, one obvious moral of this story is that leadership matters. One man can make a huge difference, even to a sprawling megalith like IBM.
But the turnaround is also a credit to the deep strength of the company's culture. The pride of "the IBM company," as those inside always call it, looked foolish and vain during the down times. Behind it, though, were real principles: belief in the power and importance of technological advancement, commitment to excellence in everything from R&D and product development to sales and marketing, and attention to the complexities inherent in managing a very large organization.
It's a testament to the power of these pre-Gerstner cultural underpinnings that his successor as CEO will not be a finance guy he brought with him from American Express or RJR Nabisco, but rather an IBM lifer, Sam Palmisano, who rose through the ranks the old-fashioned way. Gerstner's success was possible because the company was filled with smart, committed people who had spent a lot of time wrestling with daunting technology and business issues and had a lot of ideas about how to address them.
A big problem for many of the companies that have emerged in the great tech boom of the 1990s is that they don't have anything to fall back on. As long as the march is onward and upward, everything is rosy. But when the market turns and it's revealed that the CEO doesn't have every answer and that good fortune has not been entirely due to the cleverness of everyone involved, the loss of faith can be devastating, even fatal.
Business success alone is not the mark of a healthy organization, and failure doesn't mean that all is rotten. That's a nice lesson to learn from IBM.

No comments:

Post a Comment